“Recasting” financials before selling a corporation perpetually raises eyebrows for those who have not heard the term before.  Furthermore, just as home-owners “stage” their house before putting them for sale, you may need to legally dress up your business. You certainly will work to boost its appearance physically, and you furthermore might need financially.  After all, those numbers can be an important component of setting the price of your business.

Begining along with your accounting policies, make certain they follow and abide by business standards.  This might seem obvious, however business owners sometimes get lax.  Be aware, however, that potential consumers will request audited money statements showing income, expenses, and tax returns for the past 3 years. Tax tables must be the latest and correct. If inserting your business for sale in the middle of your fiscal year, prepare interim monetary statements.

Of course when a potential buyer can raise who prepared your money statements it can forever sound more appealing if your answer is somebody outside the company, acertified accountant over that of an internal CFO or controller. Any financing institution a buyer approaches conjointly will require audited monetary statements.

This is why preparing these statements early is vital to the flow of your sale.

In making ready a business for sale, it’s customary to recast historical money statements thus as better to display prospects of its future performance for a new owner. “Recasting” financials does not mean jiggering the books. Rather, it means acknowledging that you almost certainly operated in a means that minimized taxes.  This is often typically referred to as “the owner’s benefit”.

For instance, you will have awarded perks and benefits to yourself and to family members, accelerated depreciation, or reinvested profits in capital improvements. While these varieties of actions legally worked to your benifit and also the benifit of your business-from a tax standpoint and otherwise-—throughout your ownership, but they don’t accurately portray your company’s profitability and chance for a brand new owner.  Any potential buyer can want to see that owner’s benefit removed therefore they will see the true business profitability.  Historically, business owners try to reduce profits to keep their taxes low.  Now you wish to extend them to point out a replacement owner what the true history and potential of the business is.

To portray your firm’s actual potential and create it more attractive to consumers, recast financial statements to get rid of their effects and change your income statement to present what are real, operational cash flow. For instance, re-report your salary and members of the family’ salary to approximate current market salary levels. Include all expenses, like intercompany rentals, travel and entertainment, memberships and club dues are possible ready to be recast. An accountant can facilitate identify and resolve these matters, as can your investment banker, especially if your sale is imminent.

Before recasting financials, but, remember that obtaining a history of unpolluted financials could take several years, and that some buyers settle for solely original financials. You must have them available and be able to demonstrate adequate financial systems and controls.

Although it takes time, don’t underestimate the impact recasting financials can have on how your business value is perceived.  It is time well spent when selling a company.  Showcase your business as attractively as attainable to attract the patrons you have targeted.

I invite you to use these ideas as you start the journey to sell a business.

Marian Cook is a highly sought after business transition expert and speaker with over 25 years experience helping business owners design their best-life exit strategy, and improve their business performance and valuation.  She is the co-author of “Selling Your Business For More:  Maximizing Returns For You, Your Family and Your Business” (published by Macmillan).  If you are ready to sell a business and jump-start your business sale process, connect with Marian via her free tips, articles, checklists and blog at Business Transition Experts.